Here's Why Velocity Capital Partner Berhad (KLSE:VELOCITY) Has Caught The Eye Of Investors

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like Velocity Capital Partner Berhad (KLSE:VELOCITY). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

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How Fast Is Velocity Capital Partner Berhad Growing Its Earnings Per Share?

Velocity Capital Partner Berhad has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. Thus, it makes sense to focus on more recent growth rates, instead. Outstandingly, Velocity Capital Partner Berhad's EPS shot from RM0.0078 to RM0.021, over the last year. It's not often a company can achieve year-on-year growth of 162%.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Unfortunately, Velocity Capital Partner Berhad's revenue dropped 28% last year, but the silver lining is that EBIT margins improved from 3.6% to 7.5%. That falls short of ideal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

View our latest analysis for Velocity Capital Partner Berhad

Velocity Capital Partner Berhad isn't a huge company, given its market capitalisation of RM76m. That makes it extra important to check on its balance sheet strength.

Are Velocity Capital Partner Berhad Insiders Aligned With All Shareholders?

Seeing insiders owning a large portion of the shares on issue is often a good sign. Their incentives will be aligned with the investors and there's less of a probability in a sudden sell-off that would impact the share price. So we're pleased to report that Velocity Capital Partner Berhad insiders own a meaningful share of the business. In fact, they own 51% of the company, so they will share in the same delights and challenges experienced by the ordinary shareholders. This should be seen as a good thing, as it means insiders have a personal interest in delivering the best outcomes for shareholders. Valued at only RM76m Velocity Capital Partner Berhad is really small for a listed company. So this large proportion of shares owned by insiders only amounts to RM39m. This isn't an overly large holding but it should still keep the insiders motivated to deliver the best outcomes for shareholders.

Is Velocity Capital Partner Berhad Worth Keeping An Eye On?

Velocity Capital Partner Berhad's earnings per share have been soaring, with growth rates sky high. This level of EPS growth does wonders for attracting investment, and the large insider investment in the company is just the cherry on top. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. So based on this quick analysis, we do think it's worth considering Velocity Capital Partner Berhad for a spot on your watchlist. It's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with Velocity Capital Partner Berhad (at least 1 which is concerning) , and understanding these should be part of your investment process.

Although Velocity Capital Partner Berhad certainly looks good, it may appeal to more investors if insiders were buying up shares. If you like to see companies with more skin in the game, then check out this handpicked selection of Malaysian companies that not only boast of strong growth but have strong insider backing.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.